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Overnight weather forecasts turned distinctly cooler over key energy markets. "[Monday's] six-10 day period forecast is sharply cooler than Friday's forecast across the eastern two-thirds of the nation. The West is warmer," said WSI Corp. in its morning report. "CONUS GWHDDs jumped 16.1 and are now at 55.7 for the period. Forecast confidence is considered average, at best, today due to reasonably good model agreement during the period. Technical differences and residual uncertainty with tropical activity are limiting factors.

"There interior West and northern U.S. have a slight risk to the warmer side. The Northeast has room for further downward revisions, mainly with minimum temps. Otherwise, the West Coast could run cooler late in the period."

Risk managers are keeping their powder dry and not initiating hedges or speculative positions, at least for the moment. "Moderate temperatures and more than adequate supplies continue to weigh on the gas market," said Mike DeVooght, president of DEVO Capital, a Colorado-based trading and risk management, firm in weekly comments to clients.

"As we look forward to the heat season, which can often be supportive to the gas market, demand expectations have been ratcheted lower because of the El Nino. On a trade basis, we have been looking for an opportunity to get long the natural gas market but have not felt like we have yet reached the bottom of this move. We would start to be a light buyer if January reaches the $2.50 level."

DeVooght recommends both trading accounts and end-users establish long positions should the January contract reach $2.50. Producers are counseled to stand aside.

Associate Editor, Markets | Denver, COBill Burson has covered energy markets for Bloomberg, Reuters, McGraw Hill, and more recently NGI where he serves as an Associate Markets Editor. As a former geologist and petroleum industry financial analyst, he is experienced in dealing with a wide range of energy issues and events. His industry experience ranges from price forecasting to managing drilling projects in the Rocky Mountains for Union Pacific, Tesoro, and Louisiana Land and Exploration. Bill has a Geological Engineering Degree from Princeton and an MBA from Tulane University.
bill.burson@naturalgasintel.com

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